In my previous post about Noble here , I wrote that Noble is performing badly with a bad ROE and a bad D/E ratio. When these 2 ratios are faring badly, the company is heading for disaster.
But that's not the worse. The worse is- the commodities market is NOT showing any signs of improvement at all. When the industry is not improving, how can Noble's financials start to improve? Not to forget, it needs to continue paying its debt.
Today, Noble shares were cut to junk by Moody's.
"The worsening year-long rout in commodities, which has punished prices of raw materials that Noble handles from oil to copper, has overshadowed cost-cutting plans and will likely hurt access to funding and challenge its profitability, it said."
Noble's share price has now dropped to 0.41.
Please do not think it is 'Cheap'.
Stocks look cheap because the prices have dropped since its high time.
HOWEVER, there are always reasons what caused the price to drop and majority of the time, these reasons are due to valid rational decision thinking by the elite traders and banks.
Only very occasionally, very miraculously, will share price experience a sudden irrational emotionally driven drop in price. That will mean the price is 'undervalued' beyond a reasonable doubt. And yes, it certainly won't last long for such price to continue.
Remember, investment is certainly not a gamble. Much research and hard work is needed.
If you cannot resist the temptation to make money quickly, you are bound to lose a lot in the stock market.
Tuesday, 29 December 2015
Wednesday, 23 December 2015
My Christmas Present from Interplex
Hello,
Here's wishing everyone a very Merry Christmas!
Baring fund has announced their plans to buy Interplex at around S$450m with each share price at around $0.82.
This price is definitely a premium over its average share price over the year. The premium is about 62%!
I bought Interplex at $0.68 and that means I will be making some profits for this takeover. Yay! Good news! :D
The year ended with some profits and some losses for my overall portfolio. Although I picked some good buys, I also made some costly mistakes ;(
Ah well, think long term ;)
Good luck, everyone. Hoping all of you have a blessed year ahead. :)
Here's wishing everyone a very Merry Christmas!
Baring fund has announced their plans to buy Interplex at around S$450m with each share price at around $0.82.
This price is definitely a premium over its average share price over the year. The premium is about 62%!
I bought Interplex at $0.68 and that means I will be making some profits for this takeover. Yay! Good news! :D
The year ended with some profits and some losses for my overall portfolio. Although I picked some good buys, I also made some costly mistakes ;(
Ah well, think long term ;)
Good luck, everyone. Hoping all of you have a blessed year ahead. :)
Sunday, 20 December 2015
Recent Actions- Sell/Buy
Hello,
Just thought that I should share some of my recent stock actions.
Summary:
1. Bought Ascendas reit @ $2.22
2. Bought Frasers Centrepoint Trust @ $1.81
3. Bought STI ETF @ $2.86.
4. Bought OCBC @ $8.72
The Fed has increased its interest rates by 0.25% , citing an improvement in the US economy and business confidence.
Stock prices are the NPV (net present value) of its future free cash flow, a higher interest rate will mean a higher discount rate and that translates to lower NPV (lower stock price). This is the reason why stock market in SG went a nosedive last week.
Although business borrowing costs would increase due to a higher interest rate and that translates to possibly lower returns for Reits, I still went ahead to purchase Ascendas Reit @$2.22 and Frasers Centrepoint Trust @ $1.81.
These 2 Reits have a strong rental occupancy portfolio.
A-Reit has a well diversified portfolio, with 5 main property segments and situated at well located areas. It has a stable portfolio with 89.8% of portfolio revenue committed for FY15/16 and a portfolio average lease to expiry of about 3.6 years. They have also acquired One@Changi business park recently.
Frasers Centrepoint Trust has very well located shopping malls in the heartlands such as Causeway point and it enjoys consistent high occupancy rate.
I also bought STI ETF at $2.86
What I observed was that before a major announcement is to occur, Singapore's stock would experience a major fall on the day before. I grabbed STI ETF at $2.86 on 15.12.2015, the day before FED announced its IR decision. (Considering US time zone)
Lastly, I bought OCBC at $8.72
Well, I am not some finance economy expert but my observation is that bank stocks do generally better in a higher ir environment, possibly due to a myriad of many many factors. (Business confidence, better IR spreads to profit from)
In 2007, when the US ir was a crazy 5%+, OCBC stocks were at its highest (then) of $8+. When the financial crisis came about and ir suddenly took a nose dive to 0.2%, OCBC stock went tumbling down to $4+. Of course, there are many other reasons accounting for this so my addition of OCBC is more of a hedge to my portfolio.
Although the US has cited sustainable business growth, better economic performance and more jobs in the US, Singapore's economy does not look promising at the moment.
Economists have trimmed Singapore's growth forecast to 1.9% with the manufacturing sector faring the worst.
With that, I say, hold up your war chest and acquire some good business or ETF along the way :)
Just thought that I should share some of my recent stock actions.
Summary:
1. Bought Ascendas reit @ $2.22
2. Bought Frasers Centrepoint Trust @ $1.81
3. Bought STI ETF @ $2.86.
4. Bought OCBC @ $8.72
The Fed has increased its interest rates by 0.25% , citing an improvement in the US economy and business confidence.
Stock prices are the NPV (net present value) of its future free cash flow, a higher interest rate will mean a higher discount rate and that translates to lower NPV (lower stock price). This is the reason why stock market in SG went a nosedive last week.
Although business borrowing costs would increase due to a higher interest rate and that translates to possibly lower returns for Reits, I still went ahead to purchase Ascendas Reit @$2.22 and Frasers Centrepoint Trust @ $1.81.
These 2 Reits have a strong rental occupancy portfolio.
A-Reit has a well diversified portfolio, with 5 main property segments and situated at well located areas. It has a stable portfolio with 89.8% of portfolio revenue committed for FY15/16 and a portfolio average lease to expiry of about 3.6 years. They have also acquired One@Changi business park recently.
Frasers Centrepoint Trust has very well located shopping malls in the heartlands such as Causeway point and it enjoys consistent high occupancy rate.
I also bought STI ETF at $2.86
What I observed was that before a major announcement is to occur, Singapore's stock would experience a major fall on the day before. I grabbed STI ETF at $2.86 on 15.12.2015, the day before FED announced its IR decision. (Considering US time zone)
Lastly, I bought OCBC at $8.72
Well, I am not some finance economy expert but my observation is that bank stocks do generally better in a higher ir environment, possibly due to a myriad of many many factors. (Business confidence, better IR spreads to profit from)
In 2007, when the US ir was a crazy 5%+, OCBC stocks were at its highest (then) of $8+. When the financial crisis came about and ir suddenly took a nose dive to 0.2%, OCBC stock went tumbling down to $4+. Of course, there are many other reasons accounting for this so my addition of OCBC is more of a hedge to my portfolio.
Although the US has cited sustainable business growth, better economic performance and more jobs in the US, Singapore's economy does not look promising at the moment.
Economists have trimmed Singapore's growth forecast to 1.9% with the manufacturing sector faring the worst.
With that, I say, hold up your war chest and acquire some good business or ETF along the way :)
Monday, 23 November 2015
What is one astonishing fact about Warren Buffet?
99% of Buffett’s wealth was earned after his 50th birthday
Warren buffet started investing at age 11.
From 11 to 50 years, he spent 39 years in his investing career but only made the bulk of his wealth after age 50!
No, his 39 years won't wasted. This is the Magic of Compounding.
His investment returns are a whooping 15% and he is able to beat the SNP500 index of approx. 8% returns.
Warren Buffet understood this concept which few were able to, and with his prowess in investing, he is able to earn much much more (Billions and Billions)!
I have written a post about the magic of compounding here previously- how an average person at age 25 can earn $1m by age 55 through investing at 4.5% returns. I still think that it is achievable.
That said, investment requires hard work- prudent investment decisions, a tad of luck, discipline and perhaps many other factors. If you are not able to read financial statements consistently, my honest advice will be to put your savings into OCBC 360 account.... its interest is good given the risk involved.
Warren buffet started investing at age 11.
From 11 to 50 years, he spent 39 years in his investing career but only made the bulk of his wealth after age 50!
No, his 39 years won't wasted. This is the Magic of Compounding.
His investment returns are a whooping 15% and he is able to beat the SNP500 index of approx. 8% returns.
Warren Buffet understood this concept which few were able to, and with his prowess in investing, he is able to earn much much more (Billions and Billions)!
I have written a post about the magic of compounding here previously- how an average person at age 25 can earn $1m by age 55 through investing at 4.5% returns. I still think that it is achievable.
That said, investment requires hard work- prudent investment decisions, a tad of luck, discipline and perhaps many other factors. If you are not able to read financial statements consistently, my honest advice will be to put your savings into OCBC 360 account.... its interest is good given the risk involved.
Thursday, 12 November 2015
Why is Noble a bad buy even at $0.47
I know there are many Noble fans in Singapore. Sorry, but I really cannot super cannot understand why are people still buying Noble in this market?
Before I study its financial statements released yesterday, let's look at how Iron ore prices importing from China have dropped since last year. I relate to Iron ore since Noble group has a major business unit in metals and mining.
From a high of US$160+ in 2013 to the current $40+ now, the Iron ore prices have dropped so much. When iron ore drops, metals/mining/scrap all others drop too.
In fact, the commodities market has sucked so badly this year and it is of no surprise that companies dealing in this sector will face a drop in profits. When your revenue drops but your fixed costs remain, it just means that the profit will drop a lot more.
But here's the thing:
Sorry to say, metal prices show NO signs of recovering as of now.
This is because I work in the frontline of metal commodity prices so I do have some knowledge on the prices.
So if it's still not recovering, can I safely say that next quarter's financial results will still be as disappointing? Which means stock price may drop even more?
Now, let's go on to Noble's financial results:
1. ROE (Return on Equity) Based on info provided by Noble: 5%+
A healthy, growing company should have an ROE of >15%. 5% is not even 1/3 of that omg..
2. D/E ratio is 2.80+ approx.
This is like super high. A healthy company should be looking at <1
3.When ROE sucks and D/E also sucks, the company show signs that it is heading for Disaster.
If you have a high ROE and a good D/E, it is a very good growing company. If your ROE is low but D/E is also low , it implies that the company is surviving but nothing fantastic.
But if your ROE sucks and your D/E also sucks, then likely it is heading for a disaster.
4. Profits dropped 83%,
Not a surprise when commodity prices drop so much. However, cash flow is now positive and it seems that Noble has done a good job in cutting costs.
I can't determine what is a good price to buy given that the earnings are really volatile in this terrible market.
Conclusion:
Will only consider to buy when the commodity market in general show signs of picking up.
Before I study its financial statements released yesterday, let's look at how Iron ore prices importing from China have dropped since last year. I relate to Iron ore since Noble group has a major business unit in metals and mining.
From a high of US$160+ in 2013 to the current $40+ now, the Iron ore prices have dropped so much. When iron ore drops, metals/mining/scrap all others drop too.
In fact, the commodities market has sucked so badly this year and it is of no surprise that companies dealing in this sector will face a drop in profits. When your revenue drops but your fixed costs remain, it just means that the profit will drop a lot more.
But here's the thing:
Sorry to say, metal prices show NO signs of recovering as of now.
This is because I work in the frontline of metal commodity prices so I do have some knowledge on the prices.
So if it's still not recovering, can I safely say that next quarter's financial results will still be as disappointing? Which means stock price may drop even more?
Now, let's go on to Noble's financial results:
1. ROE (Return on Equity) Based on info provided by Noble: 5%+
A healthy, growing company should have an ROE of >15%. 5% is not even 1/3 of that omg..
2. D/E ratio is 2.80+ approx.
This is like super high. A healthy company should be looking at <1
3.When ROE sucks and D/E also sucks, the company show signs that it is heading for Disaster.
If you have a high ROE and a good D/E, it is a very good growing company. If your ROE is low but D/E is also low , it implies that the company is surviving but nothing fantastic.
But if your ROE sucks and your D/E also sucks, then likely it is heading for a disaster.
4. Profits dropped 83%,
Not a surprise when commodity prices drop so much. However, cash flow is now positive and it seems that Noble has done a good job in cutting costs.
I can't determine what is a good price to buy given that the earnings are really volatile in this terrible market.
Conclusion:
Will only consider to buy when the commodity market in general show signs of picking up.
Wednesday, 11 November 2015
Can you resist the temptation to make money quickly? & Some quotes from Warren.Buffet
STI went up last week when US jobs data are good.
Then STI went down this week rapidly when China's economic data is bad.
These few months, the stock market has been very volatile and I spotted some speculative stocks like Noble and Ezra trading at highs and lows.
It seems that it is really quite tempting to make money quickly by buying such speculative stocks but I am strongly against such techniques as you can get your hands burnt badly.
Let's revisit some quotes from my super idol Warren Buffet:
1."Never attempt to make quick money on the stock market."
Sound investing can make you very wealthy if you are not in too big a hurry. Buy on the assumption that they close the market the next day and not re-open it for 5 years.
2."Buy Businesses, Not stocks"
All there is to investing is picking good companies at the right times and staying with them as long as they remain good companies. Businesses you are willing to own forever.
3."Invest in great companies"
It’s better to buy wonderful company at a fair price than a fair company at a wonderful price.
My targeted actions during this volatile period:
1. Be Patient.
Mentality of an owner, not speculator. Long term investment horizon please.
2.Read and read financial reports.
Investigate and find out Why, Why , Why and read the competitors financial reports to see where is the industry heading.
I am telling myself to spend more time on reports than Facebook.
3. Before I buy and sell, think carefully of the risks and opportunity cost first.
I made some horrible careless investment mistakes in the past and I am learning from it. Hopefully, I am much wiser now.
Good luck to all other investors there!
Then STI went down this week rapidly when China's economic data is bad.
These few months, the stock market has been very volatile and I spotted some speculative stocks like Noble and Ezra trading at highs and lows.
It seems that it is really quite tempting to make money quickly by buying such speculative stocks but I am strongly against such techniques as you can get your hands burnt badly.
Let's revisit some quotes from my super idol Warren Buffet:
1."Never attempt to make quick money on the stock market."
Sound investing can make you very wealthy if you are not in too big a hurry. Buy on the assumption that they close the market the next day and not re-open it for 5 years.
2."Buy Businesses, Not stocks"
All there is to investing is picking good companies at the right times and staying with them as long as they remain good companies. Businesses you are willing to own forever.
3."Invest in great companies"
It’s better to buy wonderful company at a fair price than a fair company at a wonderful price.
My targeted actions during this volatile period:
1. Be Patient.
Mentality of an owner, not speculator. Long term investment horizon please.
2.Read and read financial reports.
Investigate and find out Why, Why , Why and read the competitors financial reports to see where is the industry heading.
I am telling myself to spend more time on reports than Facebook.
3. Before I buy and sell, think carefully of the risks and opportunity cost first.
I made some horrible careless investment mistakes in the past and I am learning from it. Hopefully, I am much wiser now.
Good luck to all other investors there!
Tuesday, 27 October 2015
Oxley retail bonds review (5%)
There has been much hype on this Oxley retail 5% bond, spanning over 4 years maturity. However, it is unrated and that means I can't rely on any Moody's analysis to discern whether it is a good deal a not.
I have to analyse on my own then. After studying its financial report and ripping it apart, below are my takeaways and humble thoughts.
Before I go to the financial jargon, I need to express that this is only my opinion and may not bear any truth at all. Analysis and thoughts are of personal opinions only. For every statement I make here, I will put 'I think'. (but it is up to you to discern what I say correct anot ;P)
FY 2014: $377,367m
FY 2015: $142,705m
Oxley holdings has achieved very impressive profits in Year 2013 and 2012, when the property market in Singapore was booming.
However, after the cooling property measures were implemented, many developers are facing a lackluster response in its properties. It is no surprise that Oxley was badly affected by it too.
Oxley has plans to expand overseas aggressively instead but looking at its financials, I do not find them promising. (to explain later)
A. Your marketing strategies CMI. (cannot make it)
B. You are not getting the response that you want, i.e, demand is not that good.
I think that it is option B because Oxley's marketing agents are mostly from Huttons and Huttons really produce impressive results in other properties previously. When you spend so much more on marketing yet get poor results, it just shows that your products are not as good.
Debt ratio (Total liabilities/Total assets) = 0.85 approx
The industry encourages standard of about (0.3~0.6) only.
Debt/equity ratio (Debt/equity)= 5.807 approx.
Other companies are <1.......
I think Oxley has too much leverage and it is risky.This means that if their business fail, I think I will be in queue 1,000,000 to get back my money lor omg. (Just joking, queue no. is a fake anyhow say number)
Look at its fixed notes it previously issued:
I think those that were issued in Year 2013 were for its projects in Y2013/Y2014 which did receive resounding success. Oxley should be able to pay them.
But for notes issued now, the money I think will be used for its overseas projects venture moving on but this leads me to the next point.
Forget its FY2015 poor performance. I think future plans are very important and the strategies form the crux of whether the company is a good investment a not.
Looking at this table, I really do not think Oxley overseas projects are promising.
A. Projects in Cambodia
I go to Cambodia- Phnom Penh every single year (I'm not a Cambodian btw) and I have some close friends there. There is an association there which I am committed too and has a close relationship with. As such, I think I have some knowledge to really say how Phnom Penh is like. And this is what majority of Phnom Penh is:
1. Mud & uneven roads
2. Slums
3.Corruption
4. Poverty
5. Main language of the people is Khmer
6. More well off people work as factory garment workers
7. Less well off people open shops infront of their living area and sell the same stuffs that other shops sell too.
8. Children not wearing underwear and running around
9. many many other scenario depicting a 3rd world country
Phnom Penh has a very very long way to go for foreign investments. And to build high rise condominiums and to attract expats to stay there, well, I think, more likely they will become AirBnb.
I do not think that Oxely's property developments in Phnom Penh are promising although their first project there did receive a good response.
B. Projects in Malaysia
Exchange rate of those people who bought properties in Malaysia during year 2013 when the market is booming there: SGD 1: MYR 2.65
The exchange rate now: SGD 1: MYR 3.05
Exchange rate in future: ????
With a very questionable government, weak currency, poor security, I think the property market there is certainly not as attractive as in year 2013. As such, I do not think that projects there will receive good response.
Also, Setia Berhad, the leading property developer there, has much more competitive advantage in its home land as compared to Oxley.
Given that Singapore's developers are facing a weakening demand here, and Oxley's prime focus is shifting to overseas with such projects in such countries, I do not have the confidence in their ventures.
5. You can get 5% yield elsewhere too
5% yield capital guaranteed by AAA credit rating from Moody's is a must grab.
But when it is unrated and it has poor future strategies, then I think it will be better if you put your money into blue chip stocks or diversified reits- Probably 6% over 7 years horizon, your money is safer.
I have to analyse on my own then. After studying its financial report and ripping it apart, below are my takeaways and humble thoughts.
Before I go to the financial jargon, I need to express that this is only my opinion and may not bear any truth at all. Analysis and thoughts are of personal opinions only. For every statement I make here, I will put 'I think'. (but it is up to you to discern what I say correct anot ;P)
1.Profit before tax dropped from FY14 to FY15 by a whopping approx. 62%
 |
FY 2014: $377,367m
FY 2015: $142,705m
Oxley holdings has achieved very impressive profits in Year 2013 and 2012, when the property market in Singapore was booming.
However, after the cooling property measures were implemented, many developers are facing a lackluster response in its properties. It is no surprise that Oxley was badly affected by it too.
Oxley has plans to expand overseas aggressively instead but looking at its financials, I do not find them promising. (to explain later)
2. Marketing expense increased 99%
I think when you increase your marketing expenses by 99% but then your results decrease by 62%, it means:A. Your marketing strategies CMI. (cannot make it)
B. You are not getting the response that you want, i.e, demand is not that good.
I think that it is option B because Oxley's marketing agents are mostly from Huttons and Huttons really produce impressive results in other properties previously. When you spend so much more on marketing yet get poor results, it just shows that your products are not as good.
3. Debt ratio and D/E ratio is high
I think it is high.Debt ratio (Total liabilities/Total assets) = 0.85 approx
The industry encourages standard of about (0.3~0.6) only.
Debt/equity ratio (Debt/equity)= 5.807 approx.
Other companies are <1.......
I think Oxley has too much leverage and it is risky.This means that if their business fail, I think I will be in queue 1,000,000 to get back my money lor omg. (Just joking, queue no. is a fake anyhow say number)
Look at its fixed notes it previously issued:
I think those that were issued in Year 2013 were for its projects in Y2013/Y2014 which did receive resounding success. Oxley should be able to pay them.
But for notes issued now, the money I think will be used for its overseas projects venture moving on but this leads me to the next point.
4.No confidence in Oxley's overseas projects venture
Look at this:
Forget its FY2015 poor performance. I think future plans are very important and the strategies form the crux of whether the company is a good investment a not.
Looking at this table, I really do not think Oxley overseas projects are promising.
A. Projects in Cambodia
I go to Cambodia- Phnom Penh every single year (I'm not a Cambodian btw) and I have some close friends there. There is an association there which I am committed too and has a close relationship with. As such, I think I have some knowledge to really say how Phnom Penh is like. And this is what majority of Phnom Penh is:
1. Mud & uneven roads
2. Slums
3.Corruption
4. Poverty
5. Main language of the people is Khmer
6. More well off people work as factory garment workers
7. Less well off people open shops infront of their living area and sell the same stuffs that other shops sell too.
8. Children not wearing underwear and running around
9. many many other scenario depicting a 3rd world country
Phnom Penh has a very very long way to go for foreign investments. And to build high rise condominiums and to attract expats to stay there, well, I think, more likely they will become AirBnb.
I do not think that Oxely's property developments in Phnom Penh are promising although their first project there did receive a good response.
B. Projects in Malaysia
Exchange rate of those people who bought properties in Malaysia during year 2013 when the market is booming there: SGD 1: MYR 2.65
The exchange rate now: SGD 1: MYR 3.05
Exchange rate in future: ????
With a very questionable government, weak currency, poor security, I think the property market there is certainly not as attractive as in year 2013. As such, I do not think that projects there will receive good response.
Also, Setia Berhad, the leading property developer there, has much more competitive advantage in its home land as compared to Oxley.
Given that Singapore's developers are facing a weakening demand here, and Oxley's prime focus is shifting to overseas with such projects in such countries, I do not have the confidence in their ventures.
5. You can get 5% yield elsewhere too
5% yield capital guaranteed by AAA credit rating from Moody's is a must grab.
But when it is unrated and it has poor future strategies, then I think it will be better if you put your money into blue chip stocks or diversified reits- Probably 6% over 7 years horizon, your money is safer.
Conclusion
I will not buy Oxley's retail 5% bonds because the risk does not justify the returns.
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